Estate Planning for Business Owners

What happens when the children grow up and they are no longer dependent on their parents? What happens to your other “baby”- the business? Estate planning for business owners deals with the personal and business assets. Business succession planning is different because it deals with your business assets only and can also take place while you’re alive. You need to have an estate plan regardless if you have a succession plan or not. Estate planning for business owners is typically more complicated because the estate plan needs to deal with:

Complex business and personal relationships

Bigger and more intricate estates

Tax issues

Business Succession

When putting an estate plan for a business owner together, one of the most difficult conversations is around fair or equal distribution of assets. What if one of the children are working in the business how do you treat them? Before you begin putting a plan in place, we always encourage open conversation and a family meeting between the parents and children to provide context behind decisions and therefore it minimizes the surprises and provides an opportunity for children to express their concerns.

We’ve put together an infographic checklist that can help you get started on this. We know this can be a difficult conversation so we’re here to help and provide guidance.

Adult Children

Fair vs Equal (also known as Equitable vs Equal) – like what’s considered to be fair may not necessarily be equal. ex. Should the daughter that’s been working in the family business for 10 years receive the same shares as the son who hasn’t worked in the family business at all?

Are the adult children responsible enough to handle the inheritance? Or would they spend it all?

Who works in the family business? Is it all the kids or just one of them?

Family Meeting

Encourage open conversation with parents and kids so context can be provided behind the decisions, there are no surprises and allows the kids to express their interests and concerns.

Facilitate a family meeting with both generations, this will help promote ongoing family unity after death and decrease the chances of resentment later.

Start looking at considerations for a succession plan for the business. (This needs to be documented separately.)

About

Life One Financial s a full service one stop financial planning organization that prides itself on a very holistic approach to tax planning – to help you maximize your tax savings today so there is more for you and your family for all your tomorrows.